As we prepared for our summer break in early December, the outlook for global markets appeared bright. The business community had largely welcomed the incoming Trump administration’s agenda on taxes, deregulation, government reform, energy, and even tariffs and immigration.
The US Federal Reserve had already cut interest rates by 100 basis points, and, while chair Jerome Powell had signalled a potential pause in further reductions, investors remained confident that with inflation declining, the central bank would resume easing policy in the second half of 2025.
The US economy was in solid shape — employment remained strong, consumer confidence was high and corporate earnings were robust. Yet three months later, businesses are grappling with Trump’s torrent of executive orders, memorandums, tariff threats and perplexing geopolitical manoeuvring.
Rather than making rash decisions, bewildered business leaders are opting to wait until the president’s plans take clearer shape. Against this backdrop, the Fed has also shown that it is in no hurry to cut rates.
Corporate heads’ caution and fears are reflected in financial markets. The hope that US exceptionalism would attract investors — especially as Europe and the UK wrestle with recession and China hesitates to stimulate growth — have yet to materialise, with the S&P 500 hovering at the same level as it did after Trump’s election victory.
Meanwhile, treasury yields have edged higher amid declining consumer confidence and the concern that the new administration’s policies could reignite inflation. But the real signal of deeper unease is gold’s surge to a record $2,950/oz.
Trump’s self-styled role as America’s saviour — coupled with his administration’s sweeping purges, legal defiance, antagonism towards allies, and indiscriminate efforts to root out perceived corruption — has amplified uncertainty, raising the fear that the president’s irrational agenda could derail America’s growth trajectory.
What we certainly did not anticipate when we traded our spreadsheets for sunscreen in early December was that European and Chinese markets would shrug off Trump’s political baiting and tariff threats and outshine Wall Street in the first two months of 2025.
At time of writing, the S&P 500 is up 1.7% since January 1, compared with gains (in dollars) of 12.6% for the Euro Stoxx 50 and 14.2% for Hong Kong’s Hang Seng index.
China’s strong market performance has been fuelled by government policies aimed at boosting domestic demand and supporting sectors hit hard by Covid-19. Premier Xi Jinping’s renewed support for private businesses and the rapid expansion of the nation’s tech sector — exemplified by the success of DeepSeek — have intensified investor interest.
Meanwhile, European stocks, long viewed as undervalued, have benefited from optimism that a steadying Chinese economy could spur demand for European consumer and industrial goods. The European Central Bank’s cautious monetary stance has further bolstered investor confidence.
In both Europe and China attractive valuations, rebounding consumer activity and proactive government policies are making these markets an appealing option for investors wary of the risks posed by Trump’s break from America’s traditions and values.
While Trump’s policy shake-ups may have unsettled markets, the resilience of American businesses is unmatched. From Silicon Valley’s boundless innovation to Wall Street’s flair for reinvention, the US economy has weathered far worse.
Investors may be flirting with Europe and China for now, but history suggests the S&P 500 always prevails — like a well-diversified portfolio, built to withstand the noise and, eventually, deliver the returns.
• Shapiro is chief global equity strategist at Sasfin Wealth.
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